Gold reversed early gains to finish lower Friday, closing out a week of heavy losses in a metals market rattled by concerns over higher interest rates and slowing economic growth.

Gold for August delivery finished down $1, or 0.2%, at $612.80 an ounce, after earlier rising to a high of $622.

Among other metals, silver for July delivery rose 13 cents, or 1.2%, to $11.21 an ounce, while copper for July delivery fell 8.9 cents, or 2.7%, to $3.26 a pound, after rising to $3.49.

Concerns that global central banks are raising interest rates -- to curb growth and inflation pressures, including from soaring commodities prices -- have brought another week of heavy losses for metals.

Federal Reserve

officials signaled they intended to lift rates further in June, while central banks in Europe, Turkey, India, South Africa and Denmark all hiked rates this week.

For the week, gold has lost 4.4%, silver dropped 7.3% and copper has lost 9%.

"It's been a tiring and volatile week and people are squaring off positions," says Amaury Conti, metals-mining equity trader at investment advisor Austin Calvert-Flavin. "What we're seeing is continuing volatility in most markets, and it will be there until we get more clarification from the Fed and the economy."

The market had received a lift early Friday as the dollar dropped after a four-day rally. A weaker greenback lifts the value of dollar-denominated commodities, such as gold, as it takes more of the currency to buy the same amount of gold.

The Dollar Index, which tracks the greenback against a basket of key currencies, was recently down 0.3%.

The dollar's decline took place despite news of a smaller-than-expected U.S. trade deficit in April and news that import prices rose more than expected in May. Both reports reinforced expectations that the Fed will again hike rates at the end of June, which is supportive of the dollar.

But that's hardly news anymore after Fed Chairman Ben Bernanke and other Fed officials made clear their concern over inflation pressures throughout the week. The market is pricing 84% odds that the Fed will hike rates in June, up from 48% last week, according to

Bloomberg

.

Yet, commodities and Wall Street remain concerned about the impact of rate hikes on growth. Stocks came under pressure as the yield of a 10-year Treasury note fell to 4.98% on Friday, leaving it below the yield of a two-year note, which stood at 5%. An inverted yield curve is often interpreted as auguring an economic recession.

"In order to truly move out from under the liquidation wave, the gold market needs to see a better attitude in the equity market," writes Nell Sloane, metals analyst at NSFutures.com. "In the near term, the fortunes of gold might sit with the direction of the dollar, which managed a very significant recovery against an established downtrend pattern this week."

Gold had also received some support Friday after the UN nuclear watchdog said that Iran's nuclear-enrichment activities picked up on the day it received an international offer to abandon the work in exchange for incentives.

Gold, which acts both as a safe-haven asset and as a hedge against inflation, had surged to 26-year highs last month as tensions mounted with Iran, the world's fourth-largest producer of crude oil, lifting the price of a barrel to $75.

Tensions had eased in recent days after Tehran said the international offer contained "positive steps." Still, following the U.N. report, crude oil rose again, with a barrel recently gaining $1.25 to $71.60.

Crude, and gold, had also received an early lift after news that a senior official in Iraq's oil ministry was kidnapped, the day after news that al-Qaeda's Iraq leader Abu Musab al-Zarqawi was killed.

Merrill Lynch also provided early support for metals on Friday, raising its forecast for the price of gold to $650 from $525 previously for this year, and to $675 from $500 for 2007.

Merrill gold analyst Michael Jalonen, however, warned that further downside can be expected over the next month. "We caution investors that the gold market is entering a period (from early May to early July) of seasonal weakness for gold jewelry," he wrote in the report. "Historically, over this period gold and gold equities have depreciated by an average of 10% and 25%."

The broker also raised its silver price forecast to $10.64 an ounce from $8 previously for 2006, and to $9 from $7.50 for 2007. It lifted its copper price forecast to $3.06 a pound from $2 previously for this year and to $2.30 from $1.75 for 2007.

Merrill's report said that even if supply and demand fundamentals remain tight for 2006, much of the surge in metals through May had been driven by investment funds into commodity indices. Still, "despite the non-fundamental drivers of the current metal price highs, it is obvious our metal price forecasts are too low and we upgraded markedly," the report said.

But based on its revised price targets, Merrill raised its price targets and/or upgraded several mining stocks. It upgraded

Newmont Mining

(NEM) - Get Report

from neutral to buy and

Golden Star Resources

(GSS) - Get Report

from sell to neutral. In recent action, Newmont was up 1.3% and Golden Star was up 4.7%.

Merrill also lifted its price target on

Bema Gold

(BGO)

to $7.0 from $7.50 previously. Bema was recently up 2.3% at $4.93.

It also raised its price target on

Eldorado Gold

(EGO) - Get Report

to $6.75 from $6.0 previously. Eldorado was recently up 2.6% at $4.67.

"The excitement over the Merrill report quickly faded and people weren't going to be taking risks ahead of the weekend," says Conti.

Overall, shares of metals miners were off earlier highs after posting heavy losses this week. The Philadelphia Gold and Silver index was recently up 0.3%, after earlier gaining 1.2%. The Amex Gold Bugs index was up 0.1%, after advancing 1.3% earlier, and the CBOE Gold index was up 0.9%, after rising 1.8%.

The newly launched

Market Vectors-Gold Miners

(GDX) - Get Report

exchange-traded fund, which tracks the performance of the Amex Gold Miners index, was up 0.5%.

ETFs tracking the metals were lower. The

iShares Silver Trust

(SLV) - Get Report

was down 0.3%, and the

StreetTRACKS Gold Trust

(GLD) - Get Report

was down 1.15%.